Polish zloty in choppy trading, rate decision tomorrow

It was a choppy week’s trading between sterling and Polish zloty last week, with economic releases first weakening and then strengthening the Polish currency. Polish producer prices figures released on Friday revealed a worse-than-expected rise in the annual rate by 3.7% in May, down from April’s revised 4.8% rise. This prompted a weakening in the zloty, however industrial output figures released the same day gave it a boost after they revealed a slowing in the pace of decline in the sector. Industrial output in May fell by an annual rate of 5.2%, which is slower than a revised 12.2% year-on-year decline in April, according to figures released by the Polish government. The zloty’s rally was further aided yesterday following a positive inflation figure, excluding food and energy prices, which showed a rise to 2.8% on the year in May from 2.6% in April. This figure was slightly above the forecasted figure of 2.7%. Attention has now turned to tomorrow’s Polish interest rate decision, where most analysts are forecasting a rate cut to 3.50% following the fall in inflation.

Sterling falls vs. euro despite ECB's refi

The pound weakened by 0.44 cents (0.37%) against the euro yesterday to close the day at 1.1785.

• In early trading yesterday, sterling strengthened against the euro, hitting its highest level since December ahead of the European Central Bank’s first ever one-year refinancing operation tomorrow.
  
• This announcement overshadowed better-than-expected German IFO Business Climate figures out mid-morning.
  
• However, weak London equities eventually dragged the pound into negative territory. The FTSE 100 finished down 111.88 (2.57%), with British Airways taking a particular hit, falling as much as 8% at some points.
  
• In trading so far today, the pound has continued its decline against the single currency as investors again take their lead from broader market movements. There are no major announcements due in the UK or the eurozone today.

Sterling weakened after London equities fall

The pound weakened considerably against the US dollar yesterday, falling 1.47 cents (0.89%) to finish at $1.6345.

• In early trading yesterday, sterling weakened against the dollar as investor jitters before tomorrow’s US Fed policy meeting helped the US currency and curtailed demand for higher-risk currencies like the pound.
  
• A survey released by UK property website Rightmove show ed a 0.4% fall in house prices in June after four months of rises also weighed on the pound.
  
• With data thin in the UK this week, sterling will generally take its lead from broader market movements, particularly London equity markets. The FTSE 100 finished the day down 111.88 (2.57%) yesterday, pulling the pound down with it.
  
• In trading so far today, the pound has continued its slide against the greenback, as investors warily eye tomorrow’s US Fed interest rate meeting.
  
• There are no major announcements due in the UK today, whilst in the US Existing Home Sales are out at 15.00 BST.

Euro weakens ahead of important announcements

The euro weakened by 0.73 cents (0.52%) against the US dollar yesterday to finish the day at $1.3866.

• In early trading yesterday, the euro weakened against the dollar as investors became wary ahead of two important announcements by their respective central banks tomorrow. The European Central Bank is set to announce its first ever one-year refinancing operation, whilst the US Fed is due to give its latest monetary policy and interest rate decision. Speculation surrounding these announcements bolstered demand for the safe-haven of the greenback.
  
• The single currency fell despite better-than-forecast German IFO Business Climate data out mid-morning. The index rose this month to 85.9 from 84.2, ahead of analysts’ forecasts of 85.1.
  
• In trading so far today, the euro has resumed its slide against the dollar as investors continue to eye tomorrow’s announcements warily.
  
• There are no major economic releases due in the eurozone today, whilst in the US Existing Home Sales are out at 15.00 BST.

Aussie weakens after SMH piece predicts rate cut

The aussie weakened for the second day running against the pound yesterday after an opinion piece in the Sydney Morning Herald argued the next Australian interest rate move will be down.

• In addition, a prediction by the World Bank that the global recession will be much deeper than previously expected also hit higher-risk currencies like the aussie.
  
• Sterling strengthened despite a fall on London equity markets yesterday, which finished down over 2.5%.

Sterling strengthens vs. kiwi despite FTSE falls

Sterling strengthened against the kiwi yesterday after concern surfaced that the RBNZ would be slow to raise interest rates after the World Bank said the recession will be deeper than expected.

• The pound strengthened against the kiwi yesterday despite falls on London equity markets.
  
• Nevertheless, the Washington-based World Bank’s prediction that the world economy would contract 2.9% in 2009, rather than the 1.7% decline previously forecasted, weighed on higher-risk currencies like the kiwi, to the benefit of sterling.